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Tuesday, January 8, 2013

"Present Trends Continuing..."

The above is the most important phrase in all of politico-economic analysis. Without it, we who attempt to foretell America's future would have to remain silent.

Unfortunately, the supposition that "present trends" will continue as they are is one of the least likely notions ever to enter public discourse. Most of the reason for that is that a "trend" exists only in the mind of an observer with a specific time frame in mind. Such time frames tend to arise from the observer's preferences rather than from any objective standard.

And with that, a few thoughts about chaos and prediction.

A serviceable definition of a chaotic system is one in which the effects of a proposed perturbation cannot be bounded with confidence. For that reason, chaotic systems respond to perturbations in ways that defy short-range prediction. However, they are not immune to long-range predictions founded not on "trends" but on current conditions.

Indeed, the initial conditions imposed upon a chaotic system are the sole worthwhile predictors of where it might find itself at some later time.

The matter becomes recursively more interesting as we proceed. It's legitimate to view every instant in the life of a chaotic system as a set of "initial conditions" for its future evolution. This is nicely illustrated by the endlessly reproducing or "fractal" quality of the conditions we see in such systems.

The political and economic systems of a large nation constitute a mutually reinforcing chaotic system. Viewed over a sufficiently long time span, the observer can trace the recurrence of patterns in such a system. Given that, he can make reasonably confident predictions about the course the system will follow into the future...even if he has no slightest chance of telling you what its state will be five minutes from now.

A chaotic system under the influence of an unchanging force will reliably develop the dreaded malady called positive feedback. That is, the effects of the force at time tn+1 will be amplified by the magnitude of its effects at time tn, for all values of n up to the inevitable blow-off formation: the point at which the system destroys itself, or is transformed so radically as to constitute a completely new system subject to completely different dynamics and rules.

There are two primary examples of such a positive-feedback effect in American political economy today:

The repeated application of a single politico-economic response -- federal deficit spending -- to the economy regardless of its current behavior.

The steady usurpation of political authority and power "upward:" i.e.:

From the governing bodies of smaller political units -- municipalities, counties, and states -- to the governing bodies of larger ones -- Washington;

From the larger elements of governing bodies -- legislatures -- to the smaller ones -- courts and executives.

Those two forces are the only ones that have been consistent throughout American post-Constitutional history. They point toward a pair of blow-off formations:

The invalidation of the dollar as an acceptable medium of exchange and the consequent dissolution of long-distance and long-duration trade.

The collapse of the remaining vestiges of the Constitutional order (i.e., federalism; separation of powers among the branches of government; explicit rights-based constraints on government action) in favor of the ultimate consolidated State: a dictatorship.

That the overall system is chaotic -- perturbed in unpredictable ways by millions of individual decisions and actions -- merely means that short-range predictions will be unreliable. As long as federal deficit spending and the consolidation of power into fewer and fewer hands continue, the long-range prediction will remain reliable.

If a question remains about that long-range prediction, it's only how long we have left before the blow-offs.

It remains remotely possible that the constancy of federal deficit spending and consolidation of power can themselves be interrupted. However, the smart money is betting against that happy vision. Few persons conversant with history believe that any amount of pressure can sway "our elected representatives" from their current path; the evidence is solidly to the contrary. One peek at the course the Obama Administration has resolved upon, and the flaccidity of the 113th Congress in fencing with him, is enough to make one gloomy about our chances.

The longer those forces continue in effect, the larger loom the associated blow-offs.

By this logic, the prognostications of the most pessimistic pundits, such as Ann Barnhardt and Karl Denninger, are the most likely eventualities for the long term, with "long" being an ever shorter length of time. But for individuals' purposes, the proper focus is not on the large-scale "what's happening out there," but on how each of us should prepare himself and his family to meet those developments.

My prescriptions remain as they've been:

Transfer as much of your wealth into physical assets as possible; emphasize gold and silver.

Create a stockpile of the necessities of life, sufficient to see you through a protracted disruption of regional and national commerce. (Other prognosticators suggest six months as the length of the disruption the prudent should prepare for.)

Arm yourself and become proficient in the use of your weapons.

Get onto the best possible terms with your neighbors; assure them that you'll "have their backs," and assure yourself that they'll have yours. Know whom you can trust, and even more important, whom you mustn't.

Be candid about all the above steps, and the reasons for them, with your spouse and children.